The Cuban Embargo

Within the cigar world there is probably not a more hot button issue like the trade embargo placed on Cuba in 1960. In the early hours of February 7th, 1962 a near total embargo against Cuba was signed into effect by President John F. Kennedy. This is the common date everyone associates the Cuban Democracy Act with as prior to this date it was simply a partial embargo against the Communist island. As most know this is still in effect to this day and is the most enduring trade embargo in modern history. In 1992 the embargo was codified into US law with the purpose to continue sanctions again Cuba so long as the Cuban government refused to move towards democratization and greater respect for human rights. The law has been added to and extended several times since 1992 to further restrict U.S. citizens from doing business with Cuba and was most recently extended by President Barack Obama until September 14th, 2012. This all began due to Cuba nationalizing American businesses on the island as well as aligning with Russia during the Cold War.

We as retailers get asked numerous questions, sometimes daily, about the embargo. Questions ranging from what makes them so good, why are they the best, when we think the embargo might end, and even what will change about what we do should it end? The answer will of course vary from person to person and maybe even from day-to-day. But the fact remains we hear them all the time.

Let’s start by looking at what is probably the most asked question: what makes them so good/why are they the best? This is of course all subjective and my answer won’t be the same as the next retailer. I always start by telling people the obvious, that taste is subjective so they may not be the best to everyone. I personally prefer a more hearty Nicaraguan to a Cuban but enjoy the forbidden fruit as well. They both offer something that I enjoy but for very different reasons. Nicaraguan tobacco is by nature a heartier, heavier tobacco while Cuban tobacco tends to be more medium in body with more subtle flavors. Each provide a different smoking experience that allows you to decide what to smoke based on the moment. The biggest difference you between each is that Cuban cigars are puro, made only of Cuban grown tobacco while non-Cuban companies will use tobacco’s from different countries. The biggest argument you will hear from many Cuban cigar smokers is that if they weren’t the best, they wouldn’t dominate the cigar market outside of the U.S. Many estimates put Cuba as holding upwards of an 80% market share on the cigar industry. However many companies don’t actively market or sell to the international market which lends itself to Cuba holding such a large share.

The next most asked question is about when/if the embargo might end. In the past 50 years it has looked mostly impossible due to political reasons. But in the past 2-3 years it has started to look more and more like a possibility. Fidel Castro has ceded power to his brother, the Communist nation has begun allowing privatized business to occur, and the embargo is starting to look more and more like a failure due to Cuba still being Communist. The point of the embargo was to create change and it really hasn’t lived up to that idea. The biggest hurdle is going to be garnering enough support in Congress to release the embargo that has for so long been such a major part of the political landscape in the United States. Under the current administration we have seen several aspect of the embargo loosened, including travel restrictions and the ability to send aid to the island. This could be just a starting point for an eventual abandonment of the total embargo that would open many new doors for both citizens of the U.S. and Cuba.

Another major point to be brought up is what changes we would see in the cigar landscape in America should Cuban tobacco be available to us. What many people overlook is the legal issues that would arise from the embargo ending. As most people know, many cigar names that came from Cuba prior to the embargo started to be made in the Dominican Republic after the embargo was signed. Brands like Partagas, Romeo y Julieta, H. Upmann, Montecristo, Cohiba and others have both Dominican and Cuban variations. What many people don’t realize is the Dominican versions of these are made by different companies, Altadis and General. The issue that this causes is that Altadis owns 50% of the Cuban cigar production arm known as Habanos S.A. and as such owns the rights to all of the above mentioned brands of Cuban origin while General owns the rights to many of the Dominican versions. The battle that would ensue over who could produce these and release these in their Cuban form would be lengthy to say the least. I personally wouldn’t expect to see any form of Cuban cigar on our store shelves for 10 years or more after the embargo was lifted. The other issue that would arise is how much supply would be available to us. Cuba right now is thought to be at maximum capacity for cigar production based on farm space available to grow tobacco from. Estimates say that Habanos S.A. is producing around 150 million cigars a year (this number is heavily disputed) and controls 80% of the foreign market. This means the international cigar market consumes around 200 million cigars a year if the Cuban number is accurate. The U.S. market consumes approximately 250 million cigars a year on its own. If Cuba is at max capacity then the availability of Cuban cigars in America is going to be extremely limited. I would also expect there to be a huge demand on this very small supply which would most likely drive the price up considerably, at least for the first several years as people seek out legal Cuban cigars once they become available. What I would expect is to see a small boom period, around 4-8 years, should they become legal as people hunt for them much like they did during the cigar boom of the late 90′s. What would be most interesting to me would be to see what manufacturers in countries like the Dominican, Honduras, and Nicaragua would do if they had Cuban tobacco to blend with their current stockpiles should there be enough for them to purchase and use. I can only imagine what we would see coming from major names like Fuente, Oliva, Padron and others should they have access to the forbidden fruit.

As long as this embargo remains in place, we will continue to get the questions, provide our answers, and just wonder “what if?” I honestly think it will be lifted in the next 15 years, which seems like an eternity, but after 60 years what need is there for it anymore? We placed the embargo with the intent to move Cuba away from a Communist government and yet they persist. We wanted them to recognize human rights on a better level and yet we continue to hold things from them that could inevitably help improve their track record. The Cold War has been over for over a decade and the U.S.S.R collapsed. At what point does this embargo collapse as well?

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